Determination Period
The Determination Period is defined in Section 40-14A-1, Code of Alabama 1975, as:
“…the taxpayer’s taxable year next preceding the taxpayer’s current taxable year…”
Generally, the Determination Period is the taxpayer’s previous taxable year.
Taxable YearTaxable Year is defined in Section 40-14A-1, Code of Alabama 1975, as:
“…the fiscal year used by the taxpayer to file returns required under the income tax levied by Chapter 18 or the financial institution excise tax levied by Chapter 16, or, in the case of an insurance company subject to the premium tax levied by Chapter 4A of Title 27, the calendar year...”
Generally, Taxable Year means the year (whether calendar year or fiscal year) used by the taxpayer to report its taxes.
Computations Involving Determination Period Information
The Alabama business privilege tax is levied for the privilege of doing business during the taxpayer’s taxable year. The Alabama business privilege tax for a taxable year is computed, generally, from information concerning the taxpayer’s previous taxable year (Determination Period).The net worth is computed from information reported on the taxpayer’s balance sheet, as of the last day of the taxpayer’s previous taxable year (Determination Period Ending Date). Net worth is computed on page 2 of the Form CPT and the Form PPT.
The apportionment factor used by the taxpayer is, generally, based on the information from the taxpayer’s state income tax returns for the previous taxable year (Determination Period). The apportionment factor is found on line 9, Part B, page 2 of Form CPT and on line 7, Part B, page 2 of Form PPT (please see the form instructions for apportionment factor).
The business privilege tax rate is based on the federal taxable income of the taxpayer for the previous taxable year (Determination Period). The business privilege tax rate is found on line 17b, Part B, page 2 of Form CPT and on line 16b, Part B, page 2 of Form PPT (please see the form instructions for business privilege tax rate).
Determination Period for Initial ReturnsThe Determination Period for entities organized in Alabama or qualifying with the Alabama Secretary of State during the current taxable year is, for both the beginning and ending dates, the date the entity was organized in Alabama or the date the entity qualified to do business in Alabama. An Alabama business privilege tax initial return is due two and one half months after the date the entity was organized in Alabama or the date the entity qualified to do business in Alabama. And, if the initial business privilege taxable year is a short taxable year, the business privilege tax is prorated, but not below $100. (See the instructions for Alabama Schedule BPT-IN, Initial Privilege Tax Computation Schedule).
Examples Concerning Determination Period and Taxable Year
Example Number 1 – Organized Prior to 2004: Assume that a calendar-year taxpayer, subject to the Alabama Business Privilege Tax, was organized in Alabama in 1998. The 2005 Alabama Business Privilege Tax return would be due on March 15, 2005.Determination Period Privilege Tax
Taxable YearBeginning Date: January 1, 2004 January 1, 2005
Ending Date: December 31, 2004 December 31, 2005
Example Number 2 – Organized During 2004: Assume that a calendar-year taxpayer, subject to the Alabama Business Privilege Tax, was organized in Alabama on April 1, 2004. The 2005 Alabama Business Privilege Tax return would be due on March 15, 2005.
Determination Period Privilege Tax
Taxable YearBeginning Date: April 1, 2004 January 1, 2005
Ending Date: December 31, 2004 December 31, 2005
Example Number 3 – Organized During 2005: Assume that a calendar-year taxpayer, subject to the Alabama Business Privilege Tax, was organized in Alabama on March 1, 2005. The initial Alabama Business Privilege Tax return would be due on May 15, 2005. See the instructions for Alabama Schedule BPT-IN, Initial Privilege Tax Computation Schedule.Determination Period Privilege Tax
Taxable YearBeginning Date: March 1, 2005 March 1, 2005
Ending Date: March 1, 2005 December 31, 2005
The taxable year would be a short taxable year, and the privilege tax computation would prorate the privilege tax over the short taxable year, but not below $100. See the form instructions for computing Gross Privilege Tax Calculated (line 18, page 2, Part B, Form CPT and line 17, page 2, Part B, Form PPT).
